What is up Cruisers?!
The stock market has been pretty crazy this week, and it is awesome to be back together to touch base! This week we have a couple new sections as well as THREE portfolio moves.
This week, CEO Alan decided to not record this week’s newsletter! Why? Because he had an awesome podcast interview on one of our portfolio picks that is absolutely awesome!
What is Inside?
📕 Chart of The Week | 😂Meme of the Week
💸Portfolio Update | 📰Portfolio Moves
🎮Trivia |🔍Spotlight: $PINS | ✈️Cruiser of the Week
📈Chart Of The Week
People just do not understand the power of Apple, how big they are, and how big certain aspects of their business are.
This past year, Apple did more revenue in Airpods than Twitter, Spotify, and Snapchat combined. Absolute craziness.
Thank you to Kevin Rooke for this amazing chart!
🗒️Meme Of The Week
We see what you did there Allison! This is hilarious!
Just yesterday, CEO Alan was a special guest on Fiducia Invests’ Twitter Spaces where he pitched our Portfolio Pick “Sprouts Farmers Market” $SFM.
Alan absolutely crushed it, and in just 30 minutes, you can hear CA’s thesis on the phenomenal company that is Sprouts!
This week was a very busy week in the Cruising Altitude portfolio as we made three moves:
$MUDS- SOLD (1/2 position)
Last week we decided to sell half of our position in $MUDS. When you make 46% in less than 3 weeks, you point to the heavens, say thanks, and then recognize it is not normal and book some of your profits!
$PINS- BUY (Full position)
After reading today’s spotlight piece, you will know just why.
$TWTR- BUY (Full position)
We will do a write up on Twitter in the future, but for now know that it is the lowest multiple trading social media company with one of the most avid user bases. Twitter has a lot up their sleeves as they look to monetize this user base. More to come.
**Editor’s Note** After finishing this week’s draft, we made some more moves! Next week we will detail them all. The portfolio correctly reflects the current “holdings” of CA.
A question you shouldn't know the answer to but will serve as a fun way to learn more about the portfolio picks or the Spotlight company.
How many “pins” (posts) have been posted on Pinterest?
A. +86 million B. +100,000 C. +4.3 trillion D. +200 billion
Answer: D. Ok it might not be as impressive as a few trillion, but 200 billion is HUGE. What’s even better? That number is growing every year.
Gross Margin- Gross margin is the amount of money a company makes from selling their goods or services after taking into account the cost of those goods or services. It is calculated by taking net sales (revenue) and subtracting the cost of goods sold (the costs directly associated with creating a good or providing a service). It is a good way to measure if a company’s business model is sustainable. The higher the gross margin the better as it means the product is more profitable!
Price to Sales (P/S)- I know what you’re thinking… I forgot all about ratios as soon as I was done with high school math. Don’t worry, this one is very easy. The price to sales ratio is simply the relationship between a company’s stock price and its revenue. It can be calculated by either dividing share price by revenue per share, or market cap (the price of all the shares of the company together) divided by the total revenue of the company. The higher the price to sales ratio the more upside/expectations is already build into the company’s stock price.
⚽Three! Two! One! Zero???
This past week, my intramural softball team had our first round playoff matchup. We got off to a rough start and found ourselves down 8 runs going into the bottom of the 6th inning (of a 7 inning game). In the bottom of the 6th, I led off the inning with a beautiful opposite field hit. Just being the Mr. Fundamental I am, I got the job done (alright Alan, its intramural softball, relax). Next thing you know, our team scores 7 runs and we are down by 1 going into the last inning.
All of a sudden, the umpire called the game. He said we passed “the time limit.” I have played baseball (and now softball apparently cuz I am getting old) my whole life and there has never been such thing as a “time limit” on the game. Some of my teammates screamed, some were happy they could go home. I on the other hand was kind of just scratching my head confused thinking this does not make much sense.
This head scratching feeling was all too familiar. No, not because I am a Cleveland Sports fan (good call though) but rather because the stock market has been filled with head scratchers. A quote like this is all too familiar these days in the market:
“Company X has phenomenal quarterly earnings as share price plummets.” Head scratching, right? If a company does well, it should go up. Well, in the long run it will, but in the short run, all bets are off.
Wall Street plays their games and so do day traders. Things can get awfully weird in the market, but when you are a long-term investor, a quote like I shared above is a dream come true.
At Cruising Altitude, we look to pounce on opportunities when a phenomenal company is trading at a significant discount to a fair valuation. Today we jump into precisely one of these opportunities, Pinterest, and I am confident that this will end differently than my softball game- with a win.
👕What is Pinterest?
“Whether it’s recipe ideas during the pandemic or dream vacation planning for the future, I’m proud that we now help 478 million people every month find inspiration to create a life they love.” - Ben Silbermann, CEO and co-founder of Pinterest.
Pinterest is a unique social media platform with a female-dominate user base (77%). It’s a place where people are looking to spend money (90% of users go with idea of making purchases) and a place that lacks “hostility.”
Ophir Gottleib, CEO of CML Viz, is one of the most brilliant investing minds of our time. Ophir tapped into Pinterest a couple of years ago, identifying that it is the one social media platform that does not have “hostility” between users and could serve as a safe haven for people interested in social media but like fun social media, not stressful social media.
Pinterests growth has been phenomenal. Check these stats out:
Revenue growth: $1.7 billion (2020) vs. $475 million (2017)
User growth: 468 million (2020) vs. 175 million (2017)
Gross Margin: 73% (2020) vs. 62% (2017)
The company’s growth has been phenomenal.
There are additionally several tailwinds that show this company is just getting started: A significant international opportunity that they grew 30% this past year, an increase in digital ad spend projected to increase by over $100 billion by 2024 (according to Statista), and additional ad streams that Pinterest is looking to add (like incorporating VR into trying on clothes experience).
$PINS is rocking and rolling, and going into earnings they were trading at a pretty hefty price to sales ratio of 29.25. But, after looking at what some other social media companies are trading at (we see you Snapchat at 32 price to sales), you start to see the value.
Side note: We at CA believe that $PINS should be trading at a higher P/S than $SNAP as it has higher upside. In our new mental-health-conscious world, Snapchat has many problems coming their way. Pinterest on the other hand does not and can be an antidote to the chaos. With that and the fact that affluent women looking to buy things are the main consumer product, it makes no sense. Additionally, when you add onto this the fact that Pins has a 72% gross margin while Snapchat has a 53% gross margin, this makes even less sense.
Pinterest released really good earnings.
Beat Revenue expectations
Beat profitability expectations
Beat average revenue per user expectations
Missed monthly active users expectations by 2 million. Wall Street wanted 480 million Pinterest gave them 478 million.
Simply put, they crushed it. How did the stock respond? It crashed. Dropped 15% in one day and then dropped a few % after that. The stock is now down 28% from its all time highs on nothing but good news.
Why did it go down? Who knows. Who cares. Something probably to due with the big guys on Wall St. and day traders.
Here is what we do know, when there is a phenomenal company trading at a very fair value (now with a price to sales of 20), we pounce. We get excited.
We think this is an easy double over the next few years and therefore added it to our portfolio.
$PINS- welcome home!
🤝Meet A Cruiser: Sara Blau
What is your education history and current job status?
I currently am a Business Management major in the Smith school and a Technology Entrepreneurship minor through the engineering school. This summer, I will be working at Ronkin Real Estate, a high-end residential real estate company in Tel Aviv. Additionally, I founded a non-profit organization called Game Changers New York. We collect and distribute sports equipment to kids in need globally. For more information, check us out at www.gamechangersny.org.
What is your Favorite part about Cruising Altitude?
My favorite part about CA is the tone that it's written in. I think that Alan and the other writers do a great job of using humor and other engaging tactics to captivate the audience! I also enjoy the educational aspect of the newsletter; as a new investor, I find it very helpful to learn new terms and concepts.
What is your favorite portfolio pick and why?
My favorite portfolio pick is Fastly. Fastly allows for everything that is uploaded to the cloud to load faster. The concept of the company as a whole is very high tech and futuristic, making it unique and interesting. Furthermore, they are a high growth company in general. Although they faced some trouble this quarter when the CFO left the company, I believe that they will continue to thrive overall since they have been quite successful in previous quarters.
“Of course I hate the bitcoin success, I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air. I think I should say modestly that the whole damn development is disgusting and contrary to the interests of civilization.”
Charlie Munger, Warren Buffet’s sidekick, has a way with his words. Whether you are pro Bitcoin or not, when the wise talk, it is important to listen and take that into your thesis.
What is Cruising Altitude’s stance on Crypto? We lean towards being against it but we are open minded because why not be. What we do know, is when Munger talks, we listen very very closely.